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The story of Augur, an Ethereum prediction market

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Re: The story of Augur, an Ethereum prediction market

#31

Post by adawes »

mattlondon wrote: post #14

Genuine question, why is this called a "prediction market" and not just a gambling exchange? As far as I can tell, this is no different from BetFair et al who let punters bet against each other on the outcome of the next football match? (apart from "oooh! blockchain!" and "oooh! decentralised!") I've read a lot of articles about this over the years and seen lots of lofty words about how this will change X/the world f…

Prediction markets are a form of gambling, but there is a key difference; whilst the purpose of traditional gambling markets is entertainment, the purpose of a prediction market is information discovery.

Some prediction markets can even be subsidised in order to incentivise participants, where the house (ie the entity running the market) expects to lose money in exchange for the information that the market is revealing. It is extremely rare to find this in a traditional gambling setting, where the house usually always reserves an edge.

This fact seems to have been largely missed by the guys behind Augur though, who seem to have focused more on the "blockchain" part of "prediction markets on the blockchain" than the "prediction market" part, and this shows through their clunky UX and relatively simple platform. Prediction markets have been around for decades (30 years ago the University of Iowa ran a market on the 1988 US election and is still running them today - https://iemweb.biz.uiowa.edu) and Augur doesn't seem to offer anything new above decentralisation, which I dont think anyone was asking for.

Re: The story of Augur, an Ethereum prediction market

#32

Post by sigstoat »

JumpCrisscross wrote: post #9
sputknick wrote: post #8

Earlier quoted context omitted.

That's mostly true, with a caveat. By default the oracle is not decentralized, but what is decentralized is the "backstop". If I create a market, I can also be the one to report on the outcome of the market (versus it being decentralized in the original plan). What they introduced is the concept of a "dispute". So if I report on a market you can dispute it and say "Hey you are lying" and if enough people agree that I…

> if enough people agree that I lied, you get a portion of the market fees This creates a host of post-closing political incentives. You are no longer betting on an event outcome, but on a consensus process.

> > if enough people agree that I lied, you get a portion of the market fees

> This creates a host of post-closing political incentives. You are no longer betting on an event outcome, but on a consensus process.

even on scicast, which was running (largely) apolitical questions and had impartial academics resolving the questions, you needed to be aware that you weren't betting on the outcome, you were betting on how somebody would decide the outcome.

it tended to be more of an issue the fuzzier the question, or the the punchier and more news-headline-y the short version of the question was. (which also made it more likely to attract the newer, less sophisticated users.)

seeing the problems that even scicast had with poorly worded questions, i don't have much hope for augur.

Re: The story of Augur, an Ethereum prediction market

#33

Post by nickles »

SuoDuanDao wrote: post #15
mattlondon wrote: post #14

Genuine question, why is this called a "prediction market" and not just a gambling exchange? As far as I can tell, this is no different from BetFair et al who let punters bet against each other on the outcome of the next football match? (apart from "oooh! blockchain!" and "oooh! decentralised!") I've read a lot of articles about this over the years and seen lots of lofty words about how this will change X/the world f…

I would expect a gambling exchange not to be transparent. The stock market is fundamentally a gambling exchange too, but it provides valuable information about the economy for free, funded by the gamblers taking part. I would say a prediction market and a gambling exchange are both built on gambling, but a prediction market has a purpose beyond money changing hands.

> The stock market is fundamentally a gambling exchange too, but it provides valuable information about the economy for free, funded by the gamblers taking part.

A stock exchange is no more a gambling den than a flea market is, although one may choose to engage in speculative activities at both.

I feel it's also a stretch to say that an equities market provides information about the economy. The information produced by trading activity on a stock exchange is principally indicative of what price people are willing to trade given stocks at. Without augmenting the transaction data with other sets of data (company fundamentals, economic reports, etc.), it's hard to draw meaningful conclusions about the economy from these transactions alone.

If you consider the valuation of a stock according to a standard modeling technique (DCF), in which the price paid for a stock is equal to the net present value of all future cashflows, you can see how a change in a stock's price may indicate nothing at all about current economic conditions. Consider, for example, a company that is prohibited from selling widgets for a year due to a patent dispute with another firm. The price of that company's stock will fall, even though we know nothing about levels of widget consumption in the economy.

Re: The story of Augur, an Ethereum prediction market

#34

Post by flyingfences »

pavel_lishin wrote: post #28
darawk wrote: post #23

Earlier quoted context omitted.

> I sat through some early presentations of Augur at the big monthly Bitcoin meeting that's been running for years in Amsterdam, and my first thought upon seeing it was, "who says what the factual outcome is?". Is that a genuine question, or are you confused about the consensus mechanism? The answer to 'who says' is the core of what Augur is: people vote on what the outcome was, in a way that incentivizes them to vot…

> You aren't betting on who will win the 2020 election, you're betting on which answer people will converge on for the winner of the 2020 election. A subtle, but important difference. To me, this undermines the argument that prediction markets are a source of truth.

The thing with prediction markets, though, is that you're not just betting on which answer people will converge on. You're betting on which answer people will converge on, weighted by their confidence in their choice.

Re: The story of Augur, an Ethereum prediction market

#35

Post by flyingfences »

paulsutter wrote: post #30
wslh wrote: post #29

If you are curious about the Augur usage metrics you can check http://dappboard.com/app/application/5a58431c5d7064dc7fb37cc...

The graph shows daily users at about 150-200 The only cryptocurrency "apps" with meaningful users are the exchanges like Coinbase or Binance with millions of users. The actual ethereum dapps have basically zero usage.

How do you measure "daily users" in this context, though? Prediction markets are often looking way out into the future. Someone may place a bet one day and then not log in to check the next day, but that doesn't mean that he is no longer "using" the market.

Re: The story of Augur, an Ethereum prediction market

#36

Post by pbhjpbhj »

adilmoujahid wrote: post #17
mattlondon wrote: post #14

Genuine question, why is this called a "prediction market" and not just a gambling exchange? As far as I can tell, this is no different from BetFair et al who let punters bet against each other on the outcome of the next football match? (apart from "oooh! blockchain!" and "oooh! decentralised!") I've read a lot of articles about this over the years and seen lots of lofty words about how this will change X/the world f…

[1] provides a good answer to this question. "The outcome becomes more predictable over time. This is because the payoff depends on the accurate prediction of an outcome of an event. Therefore, people will put in more effort to come to the most accurate conclusion. As a larger number of people do more market research to come to the most likely conclusion, the predicted outcome will lean more favorable to one side. If…

Can you show that predictions are true rather than just being perturbations. To me it looks like trading drives markets to respond (beyond large obvious fundamentals changes), rather than providing usable predictions.

Moreover, assume they are predictive, do they target funds to where society needs them.

Finally if people are good at prediction, using algorithms for example, then those algorithms provide the required prediction and we should use those to target resources and retain wealth in the market rather than giving out 40% of the wealth (UK) just to get some predictive power.

I think the value added by the market is vastly over-stated in the present model.

Re: The story of Augur, an Ethereum prediction market

#37

Post by zodiac »

JumpCrisscross wrote: post #9
sputknick wrote: post #8

Earlier quoted context omitted.

That's mostly true, with a caveat. By default the oracle is not decentralized, but what is decentralized is the "backstop". If I create a market, I can also be the one to report on the outcome of the market (versus it being decentralized in the original plan). What they introduced is the concept of a "dispute". So if I report on a market you can dispute it and say "Hey you are lying" and if enough people agree that I…

> if enough people agree that I lied, you get a portion of the market fees This creates a host of post-closing political incentives. You are no longer betting on an event outcome, but on a consensus process.

In what real-world prediction market / sports gambling / poker tournament etc are you betting on anything other than the output if some consensus process?

Re: The story of Augur, an Ethereum prediction market

#40

Post by RexetBlell »

repomies6999 wrote: post #20
mattlondon wrote: post #14

Genuine question, why is this called a "prediction market" and not just a gambling exchange? As far as I can tell, this is no different from BetFair et al who let punters bet against each other on the outcome of the next football match? (apart from "oooh! blockchain!" and "oooh! decentralised!") I've read a lot of articles about this over the years and seen lots of lofty words about how this will change X/the world f…

You have missed nothing. It is just another traditional business implemented "on blockchain", and as usual the blockchain here doesn't add value.

It actually does add value in this case. It makes it impossible for governments to shut the market down because it's decentralized (Unlike Intrade which was shut down). Also, anyone in the world can participate, even people with no access the financial system or a government ID.
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